Obameter #33: A Credit Card 'Bill of Rights'

The title of this one irks me hard. Semi-partisan regulation of the personal credit industry should not be symbolically compared to the revered, rational basis of freedom in the United States. The Constitution before it is institutional genius, but the Bill of Rights is human aspiration in ink. This Credit Card "Bill of Rights" is just fiscal sector regulation, an interesting detail in a vast legal code. The comparison is physically revolting.

But it's just a name. On to what it's about.

Credit companies are notorious (deservedly or otherwise) for hidden fees, unexpected rate hikes, and other financially hurtful tactics if you miss a payment. We've all heard horror stories, right? In an effort to combat this, the Obama campaign offered a list of new rules to implement to correct the various abuses. The new rules were based on three central principles:

1. No rate hikes without advance warning and only in response to non-payment.
2. Contract rules in plain English available online for easy comparison shopping.
3. Effective oversight by law enforcement to ensure credit card companies are actually following the rules.

The actual law as passed is considered a landmark achievement by consumer advocates, and thus has been rated Promise Kept.

Critics of the bill include bankers questioning the logic of restricting the provision of credit during a dramatic credit crunch and politicians questioning the justice of increasing everyone's interest rates in order to save credit debtors from debt for which they are at least partially at fault. The first criticism has a factual basis in that personal credit receded by a record-setting $11.1 billion the March the bill passed. The latter is harder to verify, as it's been only a couple of months and credit card interest rates have climbed continually for years. My wife says she noticed a sharp rate increase on our credit cards' interest rates, but our single example doesn't prove a national trend.

Still, the logic behind the interest rate criticism fits. If we image credit cards offering competitive rates to attract customers and horrible "gotcha" clauses if you miss a payment or only pay the minimum due each month, then financially foolish were carrying the weight of our credit cards for us. If the law ends that, isn't it logical to think the rest of us will be carrying a bit more of the financial load necessary to keep the credit card companies in the black? I can sympathize with someone who got themselves into a credit debt mess and is looking for help out, but I loose some of that sympathy when money is taken out of my pocket regardless of my opinion on the matter and used to aid them. I imagine we'll see a recognizable rate increase once we have more data available.

Conveniently, I'll be out of debt at approximately the end of the month. I plan never to use credit cards again. If it weren't for my wife's insistence that we keep 'em around for financial emergencies, I'd happily send them through my sleek, powerful shredder today. (It'll shred CDs, cardboard, unopened credit card applications... I love that shredder!)

Anyhoo, back to Obama. I have mixed feelings about this bill, even ignoring the horrendous name. I want to see credit card debtors helped, but I disapprove of government wielding private industry in such a way as to levy more fiscal weight onto the backs of the fiscally responsible. I certainly can't fault the law enforcement principle, but overall I have to disapprove. There are already credit counseling programs, debt reduction services, and Dave Ramsey out there helping people directly. I'm not sure this government intervention improves upon their existing efforts.

I'm right on the edge, but I lean just a hair toward opposing the bill. It's probably just my conservative bias -- if a change doesn't obviously improve things overall, why make it?